Endless Possibilities

Endless Possibilities 2015 Annual Report & Financial Statements

Milestones Pan Africa Insurance Holdings Limited was incorporated on 26th October 1946, then known as Indo Africa Insurance Company Limited Started underwriting life business in 1947 Listed on the Nairobi Securities Exchange in 1963. It is the first Insurance Company to be quoted Name changed in 1963 to Pan Africa Insurance Company Limited to reflect its broader ownership base Started underwriting general insurance business in 1972 Entered into a strategic partnership with African Life Assurance in 2000 In 2001, the Company formed two wholly owned subsidiaries: a. Pan Africa Life Assurance Limited that carries on the life insurance business and b. Pan Africa General Insurance Limited that carries on the general insurance business In 2001, introduced for the first time in Kenya, life insurance products to clients afflicted with HIV/AIDS and is the first company to actively market and distribute unit-linked life assurance products In 2003, Pan Africa General Insurance Limited merged with Apollo Insurance Limited to form APA Insurance Limited In 2006, Sanlam Limited buys out African Life Assurance Group In 2007, Pan Africa Life introduced the Flexi range of products In 2008, Pan Africa Life emerged the market leader in the Life business in Kenya (AKI industry statistics) In 2010, Championed the sale of funeral insurance in Kenya In 2013, Acquires Sanlam Investment Management, now Pan Africa Asset Management In 2014, New Life Admin system In 2015, Pan Africa Insurance Holdings buys Gateway Insurance Company

Contents 1 Company Information 4 Five Year Group Review 5-6 Report of the Directors 7-8 Profile of the Directors 10-11 Senior Management 12-13 Chairman s Report 14-16 Taarifa ya Mwenyekiti 17-19 FINANCIALS REPORT Group CEO Statement 20-23 Notice of the Annual General Meeting 24-25 Ilani ya Mkutano Mkuu wa Mwaka 26-27 Corporate Governance Report 28-36 Statement of Directors' Responsibilities 37 Report of the Statutory Actuary 38 Report of the Consulting Actuary Gateway Insurance Company Limited 39 Embedded Value Report 40-43 Report of the Independent Auditor 44-45 Group and Company Statement of Profit or Loss 46 Group and Company Statement of Comprehensive Income 47 Group and Company Statement of Financial Position 48 Group Statement of Changes in Equity 49 Company Statement of Changes in Equity 50 Group and Company Statement of Cash flows 51-52 Notes to the Financial Statements 53-152 Pan Africa Insurance Holdings Limited Annual Report & Financial Statements 2015 Endless Possibilities

2 Endless Possibilities With Pan Africa Insurance Holdings Limited s wide range of products I have been able to completely transform my personal and professional life. I now look forward to a future of Endless Possibilities Endless Possibilities Pan Africa Insurance Holdings Limited Annual Report & Financial Statements 2015

Our Core Values 3 DYNAMISM We are committed to creating an inclusive business culture that welcomes the strengths of our diverse workforce and supports everyone s involvement. We strive to be relevant at all times and responsive to our customer needs. CLIENT FOCUS Through fostering longterm relationship with our customers, we will pro actively understand their needs and tailor relevant solutions while consistently delivering on our promises. ACCOUNTABILITY We take full responsibility for our actions and results as well as honour our commitments and take pride in being a good corporate citizen. PROFESSIONALISM Internal and external relationships are conducted with respect and discretion. INTEGRITY We take pride in treating all stakeholders in an honest and fair manner, while maintaining dignified and ethical conduct at all levels of our interactions. NURTURING We recognise individual potential and draw synergies to achieve our objectives. Pan Africa Insurance Holdings Limited Annual Report & Financial Statements 2015 Endless Possibilities

4 Company Information PRINCIPAL PLACE OF BUSINESS Pan Africa Life House 1st Floor Kenyatta Avenue P.O. Box 44041-00100 NAIROBI REGISTERED OFFICE LR No. 209/927 Pan Africa Life House 1st Floor Kenyatta Avenue P.O. Box 44041-00100 NAIROBI BANKERS Barclays Bank of Kenya Limited Barclays Plaza P.O. Box 46661-00100 NAIROBI Standard Chartered Bank of Kenya Limited Kenyatta Avenue P.O. Box 30001-00100 NAIROBI Co-operative Bank of Kenya Limited Ukulima Branch P.O. Box 74956-00200 NAIROBI Family Bank Limited Kenyatta Avenue Branch P.O. Box 74145-00200 NAIROBI INDEPENDENT AUDITOR PricewaterhouseCoopers PwC Tower Waiyaki Way Westlands P.O. Box 43963-00100 NAIROBI LEGAL ADVISERS Kaplan & Stratton Advocates Williamson House, 4th Ngong Avenue NAIROBI Muriu Mungai Advocates MMC Arches Spring Valley Crescent NAIROBI Simba & Simba Advocates 6th Floor, Finance House Loita Street NAIROBI Muthaura Mugambi Ayugi & Njonjo Advocates 4th Floor, Capital Hill Square, Upper Hill NAIROBI Waruhiu & Company Advocates 12th Floor, International House Mama Ngina Street National Bank of Kenya Limited Kenyatta Avenue P.O. Box 30645-00100 NAIROBI GROUP COMPANY SECRETARY Emma Wachira Pan Africa Life House 1st Floor Kenyatta Avenue P.O. Box 44041-00100 NAIROBI Endless Possibilities Pan Africa Insurance Holdings Limited Annual Report & Financial Statements 2015

Five Year Group Results 5 2011 2012 2013 2014 2015 KShs.m KShs.m KShs.m Kshs.m KShs.m Statement of profit or loss: Total other revenue 1,056 595 685 294 609 Operating profit before tax and share of associate 551 833 1,514 1,150 51 Profit / (Loss) attributed to shareholders 286 600 1,253 871 (62) Insurance business: Gross premium income 3,648 5,441 5,324 5,247 5,182 Net premium income 3,300 5,126 5,102 4,991 4,797 Net benefits and claims paid 1,876 5,521 5,274 5,054 4,257 Statement of financial position: Total equity 1,965 2,373 3,338 3,778 3,802 Long term policy liabilities 7,860 11,902 14,938 17,446 19,667 Share capital 480 480 480 480 720 Total assets 11,514 16,474 21,158 24,599 27,109 Key indicators: KShs. KShs. KShs. KShs. KShs. Basic earnings per share 3 6 13 6.05 (0.43) Dividends per share 2 3 4.5 - - Dividends 192 288 432 - - Market capitalisation at year end (KShs. m) 1,992 3,864 8,640 11,520 8,640 Group share prices at the NSE: Annual High 110 45 100 145 141* Annual Low 18 18 39 87 55 Share price at year end 21 40 90 120 60 * Price before bonus issue Pan Africa Insurance Holdings Limited Annual Report & Financial Statements 2015 Endless Possibilities

6 Five Year Group Results continued Gross Premium Income (KShs in m) Net Benefits and Claims Paid (KShs in m) 3,648 5,441 5,324 5,247 5,182 5,521 5,274 5,054 4,257 1,876 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Profit Attributed to Shareholders (KShs in m) Long Term Business Funds (KShs in m) 1,253 871 17,446 19,667 600 11,902 14,938 286 7,860 27 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Endless Possibilities Pan Africa Insurance Holdings Limited Annual Report & Financial Statements 2015

Report of Directors 7 The directors submit their report together with the audited financial statements for the year ended 31 December 2015 that discloses the state of affairs of the company and its subsidiaries. Incorporation Pan Africa Insurance Holdings Limited is a company whose shares are traded publicly on the Nairobi Securities Exchange (NSE). It was incorporated in Kenya on 26 October 1946 under certificate of incorporation number C.10/46 under the Kenyan Companies Act (Chapter 486 of the Laws of Kenya) and is domiciled in Kenya. Principal Activities The principal activity of the Group, through its subsidiaries Pan Africa Life Assurance Limited and Gateway Insurance Company Limited, is the underwriting of all classes of long-term and short term insurance business as defined by the Insurance Act (Chapter 487 of the Laws of Kenya), with the exception of industrial life insurance and aviation. The Group has interests in a wholly owned investment company (PA Securities Limited), wholly owned investment management company (Pan Africa Asset Management Limited), Mae Properties Limited (dormant) and Chem Chemi Mineral Water Limited (dormant). In 2015, the Group acquired a 56% stake in Gateway Insurance Company Limited. Results The profit for the year of KShs. 27,350,000 (2014: KShs. 871,190,000) has been added to the retained earnings. Financial Risk Management Objectives and Policies The activities of the company and its subsidiaries expose it to a variety of financial risks, including underwriting risk, credit risk and the effects of changes in debt and equity market prices, and interest rates. Therefore the risk management programme focuses on the identification and management of risks and seeks to minimise potential adverse effects on its financial performance. These include the use of underwriting guidelines and capacity limits, reinsurance planning, credit policy governing the acceptance of clients, and defined criteria for the approval of intermediaries and reinsurers. Investment policies are in place to enable optimal liquidity management and to maximise returns within an acceptable level of risk. Authorisation The consolidated financial statements of Pan Africa Insurance Holdings Limited for the year ended 31 December 2015 were authorised for issue in accordance with a resolution of the directors on 17th March 2016. The owners have the power to amend the financial statements after issue. Financial Statements At the date of this report, the directors were not aware of any circumstances, which would have rendered the values attributed to the assets and liabilities in the financial statements of the company to be misleading. Directors The directors who served during the year and up to the date of this report are: John PN Simba : Non executive : Chairman Mugo Kibati : Executive : Group Chief Executive Officer Margaret Dawes : Non executive Rohan Patel : Non executive : Alternate : Baloobhai Patel Jonathan Paul Wrench : Non executive Susan Mudhune : Non executive Wikus Olivier : Non executive John Alexander Burbidge : Non executive Pan Africa Insurance Holdings Limited Annual Report & Financial Statements 2015 Endless Possibilities

8 Report of Directors (continued) Independent auditors The Company s auditor PricewaterhouseCoopers, has expressed its willingness to continue in office in accordance with Section 721 (2) of the Companies Act (No. 17 of 2015 of the laws of Kenya). By Order of the Board Emma Wachira Group Company Secretary 17 March 2016 Endless Possibilities Pan Africa Insurance Holdings Limited Annual Report & Financial Statements 2015

9 My life started on this whole new journey, its only the beginning. Pan Africa Insurance Holdings Limited Annual Report & Financial Statements 2015 Endless Possibilities

10 Board of Directors Dr. John P N Simba (Chairman) Rohan Patel John Burbidge Dr. John PN Simba OGW, MBS (71) (Chairman) Appointed to the Board in December 2001; Appointed as Chairman in March 2002 Occupation: Lawyer, Partner in Simba & Simba, Advocates Academic Qualifications: LLD ((Hon.) University of Nairobi), Bachelor of Law (University of Dares-Salaam) Professional Qualification: Advocate of the High Court of Kenya, Member Institute of Directors (Kenya) Margaret Dawes (58) Appointed to the Board in March 2005 Occupation: Executive Director- Rest of Africa -Sanlam Emerging Markets Academic Qualifications: B.Sc. (Biology) University of London and Higher Diploma in Tax Law (University of the Witwatersrand) Professional Qualifications: ACA (England & Wales), Chartered Accountant (SA) Rohan Patel (40) Appointed to the Board on 16 May 2014 Academic Qualifications: MBA (IMD), MSc Management (LSE), BA Geography (LSE) Professional Qualifications: Certificate in Real Estate, Development and Hotel Investment (Cornell) Margaret Dawes John Burbidge (66) Appointed to the Board on 16 May 2014 Occupation: Accountant Academic Qualifications: Cheadle Hulme School, Manchester, United Kingdom. Professional Qualifications: Fellow of the Institute of Chartered Accountants in England and Wales. Endless Possibilities Pan Africa Insurance Holdings Limited Annual Report & Financial Statements 2015

Board of Directors 11 Mugo Kibati Jonathan Paul Wrench Susan Mudhune Mattys Lodewikus Olivier Mugo Kibati (46) Appointed to the Board on 17 February 2015 Occupation: Group Chief Executive Officer Academic Qualifications: B.Sc. Engineering (Moi University), MBA (Finance & Econ-George Washington University), Masters Degree in Technology & Policy (MIT) Professional Qualifications: FKIM. Jonathan Paul Wrench (42) Appointed to the Board on 9 August 2011 Occupation: Head of Actuarial-Rest of Africa Sanlam Emerging Markets Academic Qualifications: Bachelor of Science (Hons) in Actuarial Science Professional Qualifications: Fellow of the Institute of Actuaries, Fellow of the Actuarial Society of South Africa Susan Mudhune (66) Appointed to the Board on 18 August 2009 Occupation: Banker Academic Qualifications: MBA (University of Nairobi, BA in Education (University of Nairobi) Professional Qualifications: Fellow of the Institute of Bankers (Kenya), Fellow of the Kenya Institute of Management Wikus Olivier (42) Appointed to the Board on 16 May 2014 Occupation: Head: Group Finance, Sanlam Academic Qualifications: B. Accounting (University of Stellenbosch)-Cum Laude, Hons. B. Accounting (University of Stellenbosch)- Cum Laude Professional Qualifications: Chartered Accountant (SA) Pan Africa Insurance Holdings Limited Annual Report & Financial Statements 2015 Endless Possibilities

12 Senior Management 1 Victoria Ipomai Occupation: Group Chief Financial Officer Academic Qualifications: MBA, BA Building Economics Professional Qualifications: FCCA 3 Mugo Kibati Occupation: Group Chief Executive Officer Academic Qualifications: B.Sc. Engineering (Moi University), MBA (Finance & Econ- George Washington University), Masters Degree in Technology & Policy (MIT) Professional Qualifications: FKIM 2 George Kuria Occupation: Chief Executive Officer - Gateway Insurance Company Limited Academic qualifications: Bachelor of Commerce Degree (Insurance), Masters in Business Administration Professional qualifications: Diploma in Insurance, Certificate in Corporate Governance 3 1 2 Endless Possibilities Pan Africa Insurance Holdings Limited Annual Report & Financial Statements 2015

13 13 7 5 6 7 Kennedy Muriithi Occupation: Chief Executive Officer Pan Africa Asset Management Limited Academic Qualification: Bachelor Commerce Accounting Professional Qualifications: CPA (K) 4 4 Stephen Kamanda Occupation: Chief Executive Officer - Pan Africa Life Assurance Academic Qualifications: BA (Economics), MBA in Finance Professional qualifications: FCCA (UK), ICSA (UK), CPA (K) 5 Miriam Gathura Occupation: Group Head of Human Resource and Administration Academic qualifications: Bachelor of Science, MSc Human Resources Professional qualifications: Post Graduate Diploma Human Resource Management (IHRM, K) Certificates in Human Resource Management (IHRM, K) 2002 to 2004 6 Emma Wachira Occupation: Group Company Secretary/Chief Legal Officer Academic qualifications: Bachelor of Law degree (University of Nairobi) Professional Qualifications: Advocate of the High Court of Kenya, CPS (K) Pan Africa Insurance Holdings Limited Annual Report & Financial Statements 2015 Endless Possibilities

14 Chairman s Statement decline in oil prices had the impact of narrowing the current account trade deficit by reducing the import bill on petroleum products. The economy registered an average GDP growth rate of 5.8% in 2015. There is increased optimism for stronger growth in 2016 with projections of up to 6%, driven by a strong macroeconomic environment driven by continued investment in infrastructure, lower oil prices and improved performance of the tourism sector. Overall annual inflation stood at 8.01%. The main drivers were food prices and excise duty on alcoholic beverages both of which pushed up inflation. Food prices were impacted by increased transportation costs as a result of the heavy rains in the fourth quarter. Inflationary pressure is expected to ease in 2016 in view of the depressed global crude oil prices. Enhanced monitoring by the Central Bank of Kenya, together with the precautionary arrangement with the International Monetary Fund saw an increase in the foreign exchange reserves to 4.5 months import cover and continue to provide a sufficient buffer against short-term shocks. On behalf of the Board of Directors of Pan Africa Insurance Holdings, I am pleased to present the annual report for the 2015 financial year. Global Economy The global economy in 2015 was characterized by numerous setbacks. The main shocks were commodity price crashes, slowdown in China s economy and the Federal Reserve Bank s rate action, which together kept world economies in suspense most of the year. Both energy and non-energy commodity prices declined, with crude oil shedding 47% of the value. Recovery expected from the quantitative easing measures that followed the 2008 financial crisis by major central banks have not adequately stimulated productivity enhancing investments yet. Kenyan Economy Macroeconomic conditions in Kenya were slightly insulated from activities in the world economy during the year, except for sectors that are more integrated to the global financial markets. The stock market in particular, which had benefited from foreign inflows, bore the brunt of reduced inflows and withdrawals. The Equity markets saw a significant decline during the year, shedding off 27.88% to close at 3769. The decline was due to a combination of factors, ranging from depressed corporate earnings by listed firms, reduced inflows from foreign investors and a shift in focus to fixed income securities as a result of the increase in interest rates. The decline further negatively impacted the performance of firms with exposure to the stock market from significant downward revaluation of the assets. Insurance Industry The insurance industry in Kenya faced numerous challenges throughout 2015 from the volatile market environment as witnessed through high interest rates with the resultant liquidity crunch, decline in the stock market, heightened inflation, depreciation of the Kenya shilling and insecurity. The year as a result recorded slowed down revenue growth, low investment earnings against a significant rise in operating costs. The poor performance was manifested in the numerous profit warnings by listed firms that hit a record high of 15 by the end of 2015. However, financial services continue to attract interest and foreign investment inflows in view of the relatively favourable demographic dynamics, advancement in technology driven offerings and the low penetration levels. Endless Possibilities Pan Africa Insurance Holdings Limited Annual Report & Financial Statements 2015

Chairman s Statement (continued) 15 On the regulatory front, the main developments were changes in the Finance Act 2015 introducing risk based supervision. The changes, aimed at strengthening institutions in the sector and improving their capabilities to exploit emerging opportunities, require an increase in core capital for both Life and Non-Life operators. The immediate implications are a deliberate plan for capitalization, de-risking balance sheets and a focus on profitable growth. Timelines for compliance though staggered, take effect from June 2016 and are expected to become fully enforced in June 2018. Group Performance Operations at Pan Africa Insurance Holdings were heavily influenced by external market forces due to the regulated business units and their involvement in financial intermediation. In addition to the adverse investment market conditions in 2015, the Life Insurance business was negatively impacted by challenges experienced within our distribution network from the second half of 2014 through to the third quarter of 2015. We have since bolstered our Life Insurance sales agency force through a series of recruitment drives. We have also put in place a competitive remuneration structure to ensure that we retain our distribution force at optimal levels. The General Insurance business that we acquired during the year also performed below expectation. This was partly due to uncertainty created by the acquisition, as well as a significant increase in the provisioning for outstanding claims upon adoption of a more conservative claims reserving methodology. This lays a strong foundation for optimal performance in the future. We are happy to report that the Asset Management business delivered a strong performance, growing its assets under management by 16% despite the sharp decline in the equity market. We remain confident about the company s future prospects, across all business lines. Dividend The Board of Directors will not be recommending a dividend in respect of the 2015 results. This decision has been necessitated by the decline in profitability as a result of the adverse performance in the investments market that the business units are exposed to. We strive to continuously balance dividend payments with the need to preserve capital to fund growth and ongoing development projects. 2015 Awards and recognitions The business world has once again acknowledged the areas that Pan Africa excels in. In 2015, we were the winners in the FiRe Awards (Insurance Category). We also won the following Think Business awards: ICT Award, 1st runners-up Risk Management Award, 1st runners-up Customer Satisfaction, 2nd runners-up Statement of Corporate Governance Good corporate governance is a key component of our business and essential for the long-term success of the Group. As a public listed company, Pan Africa complies with the guidelines and regulations as issued by the Capital Markets Authority and also operates in accordance with internationally accepted standards of good governance. The Group is equally alert to changes in the regulatory environment. In this regard, Pan Africa is keen on implementing The Code of Corporate Governance Practices for Issuers of Public Securities to the Public as issued in the year 2015. Outlook for 2016 Global growth for the year 2016 is projected at 3.4%, an increase from 3.1% in 2015. Economic growth, especially in emerging markets and developing economies, is expected to slow down. This will have a significant impact on the global economy, considering that jointly, emerging markets and developing economies account for over 70% of the growth. Nonetheless, growth in the emerging markets and developing economies is expected to increase from 4% in 2015 to 4.3% in 2016. In Kenya, economic growth is expected to average above 6%. The outlook for equities during the year is mixed due to its exposure to external macroeconomic forces. The general optimism for the economy in 2016 may however trigger an upturn in the market. Despite the poor performance in the past year, there is a general optimism for a better economic environment in 2016. This will hopefully spur growth in the financial services sector and diminish any negative effects on profitability. This will however be realised if firms consider diversified approaches to growth, invest in more efficient operations and strengthen their balance sheets to support growth and in readiness for enhanced regulatory capital requirements. In March 2016, the Insurance Regulatory Authority issued a self-assessment tool on Treating Customers Fairly, which will form the basis of all insurance business with effect from 1 January, 2017. We welcome this framework as it fits into our key value of focusing on the customer. Our organization will make the changes Pan Africa Insurance Holdings Limited Annual Report & Financial Statements 2015 Endless Possibilities

16 Chairman s Statement (continued) necessary to meet this challenge and comply with the new requirements. As a business, we remain optimistic about our prospects. We have re-entered the general insurance market and are proud of our position as a diversified financial services firm. This puts us in good stead to weather the headwinds and deliver impressive results. Closing Note I take this opportunity to acknowledge the Board, Management and Staff for their efforts in the face of a challenging economic environment. I sincerely thank them and wish them all the best as they continue to deliver value to our customers and shareholders. I would also like to thank the shareholders for their continued show of support and confidence in us. The Board, taking into account Pan Africa s forward-looking strategic plans, is confident that Pan Africa Insurance Holdings group will grow phenomenally in the next year. Dr. John P N Simba, MBS OGW Chairman 17 March 2016 Endless Possibilities Pan Africa Insurance Holdings Limited Annual Report & Financial Statements 2015

Taarifa ya Mwenyekiti 17 kutokana na kuingia kwa biashara za kigeni, lilikumbwa na upungufu wa uingiaji huo pamoja na kujiondoa. Kupungua kwa bei za mafuta kulipunguza nakisi ya biashara kwa kupunguza gharama ya uagizaji wa bidhaa za petroli. Uchumi ulishuhudia kiwango cha wastani cha ukuaji wa pato la jumla kwa asilimia 5.8 mwaka wa 2015. Kuna matumaini ya ukuaji thabiti mwaka wa 2016 huku ikibashiriwa kwamba utakua kwa hadi kiwango cha asilimia 6, kutokana na hali thabiti ya chumi kuu kufuatia uwekezaji mfululizo katika muundo msingi, bei za chini za mafuta, na kuimarika kwa sekta ya utalii. Kiwango cha kupanda kwa gharama ya maisha kwa mwaka kilifikia asilimia 8.01. Kiwango hiki kiliongezwa na bei za vyakula na ushuru wa vinywaji vya pombe. Bei za vyakula ziliongezeka kutokana na kupanda kwa gharama ya usafirishaji kutokana na mvua nyingi katika robo ya nne ya mwaka. Shinikizo la kupanda kwa gharama ya maisha linatarajiwa kupungua mwaka wa 2016 kutokana na kupungua kwa bei ya kimataifa ya mafuta ambayo hayajasafishwa. Kuimarishwa kwa uchunguzi wa Benki kuu ya Kenya, pamoja na utaratibu wa tahadhari na Shirika la Fedha Duniani kulipelekea ongezeko katika hifadhi ya ubadilishanaji fedha za kigeni hadi kinga ya uagizaji ya miezi 4.5 na kuendelea kutoa kinga dhidi ya misukosuko ya muda mfupi. Kwa niaba ya Halmashauri ya Wakurugenzi wa Kampuni ya Pan Africa Insurance Holdings, ni furaha yangu kuwasilisha ripoti ya mwaka kwa mwaka wa matumizi ya fedha wa 2015. Uchumi Duniani Uchumi wa dunia mnamo mwaka wa 2015 ulikabiliwa na changamoto mbalimbali. Changamoto kubwa zaidi zilikuwa kudorora kwa bei za bidhaa, kuzorota kwa uchumi wa nchi ya Uchina na hatua ya viwango vya hifadhi ya benki kuu nchini humo, ambazo kwa pamoja zililsababisha hali ya kutokuwa na uhakika katika chumi za dunia mwaka huo. Bei za bidhaa za kawi na zisizokuwa za kawi zilipungua, huku mafuta ambayo hayajasafishwa yakipungua thamani kwa asilimia 47. Ufufuzi uliotarajiwa baada ya hatua kuchukuliwa kukabiliana na mzozo wa kifedha wa mwaka wa 2008 na benki kuu nyingi bado hazijachochea utoaji unaoimarisha uwekezaji. Uchumi wa Kenya Hali ya chumi kuu nchini Kenya ilikingwa kwa kiasi fulani kutokana na shughuli katika uchumi wa dunia katika kipindi cha mwaka, isipokuwa sekta ambazo zinafungamana na masoko ya kifedha ya dunia. Soko la hisa haswa ambalo lilikuwa limefaidika Biashara katika masoko ya hisa ilidorora wakati wa kipindi cha mwaka, na kupungua kwa asilimia 27.88 huku ikifunga kwa kiwango cha 3769. Upungufu huo ulitokana na sababu mbalimbali kutoka kupungua kwa mapato ya kampuni zilizoorodheshwa kwenye soko la hisa, kupungua kwa uingiaji wa biashara kutoka kwa wawekezaji wa kigeni na kuzingatiwa zaidi kwa dhamana za mapato ya kuweka fedha kwa muda fulani kwenye benki kutokana na kuongezeka kwa viwango vya faida. Kupungua huko pia kuliathiri utendaji wa kampuni zinazojihusisha pia na uwekezaji katika soko la hisa kutokana na kupungua thamani kwa rasilimali. Sekta ya Bima Sekta ya bima nchini Kenya ilikabiliwa na changamoto kadhaa mwaka wote wa 2015 kutoka kwa hali isiyo thabiti ya soko kama ilivyoshuhudiwa kupitia kwa viwango vya juu vya riba vilivyosababisha matatizo ya pesa, kupungua kwa shughuli katika soko la hisa, kupanda kwa gharama ya maisha, kupungua thamani kwa sarafu ya Kenya na ukosefu wa usalama. Kutokana na hayo mwaka huo ulishuhudia ukuaji wa mapato wa kiwango cha chini, mapato ya uwekezaji ya kiwango cha chini dhidi ya ongezeko kubwa la gharama za uendeshaji. Utendaji huu duni ulidhihirika kwenye tahadhari kadhaa za faida zilizotolewa ka Pan Africa Insurance Holdings Limited Annual Report & Financial Statements 2015 Endless Possibilities

18 Taarifa ya Mwenyekiti kampuni zilizoorodheshwa kwenye soko la hisa ambazo zilifikia 15 kufikia mwisho wa mwaka wa 2015. Tunaendelea kuwa na imani na matarajio mema ya siku zijazo ya kampuni yetu katika biashara zetu zote. Hata hivyo huduma za kifedha zinaendelea kuvutia faida na uwekezaji kutoka nchi za kigeni kutokana na hali ya kuvutia ya mifumo ya muundo wa jamii, maendeleo katika mapato yenye msukumo wa tekinolojia, na viwango vya chini vya upenyaji. Kuhusu kanuni za kisheria, matukio makuu yalikuwa mabadiliko kwenye Kifungu cha Sheria ya Kifedha ya mwaka wa 2015 yaliyojumuisha usimamizi wa hali ya mashaka. Mabadiliko hayo yaliyonuiwa kuthibiti taasisi katika sekta hii na kuimarisha uwezo wa kutumia kikamilifu nafasi zinazoibuka, yanahitaji kuongezwa kwa mtaji kwa waendeshaji bima ya maisha na isiyo ya maisha. Hatua ya mara moja inapelekea kubuniwa kwa mpango wa mtaji, kuondoa hali ya mashaka kwenye mizania na kuzingatia ukuaji wa faida. Muda wa kuzingatia utekelezaji unaanza mwezi Juni 2016 na unatarajiwa kutekelezwa kikamilifu kufikia Juni 2018. Utendaji wa Kundi Shughuli katika kampuni ya Pan Africa Insurance Holdings ziliathiriwa sana na misukumo ya masoko ya nje kutokana na vitengo vya biashara vilivyothibitiwa na kuhusika kwao katika muingiliano wa kifedha. Pamoja na athari kali za hali ya uwekezaji ya masoko mnamo mwaka wa 2015, Bima ya maisha iliathiriwa vibaya na changamoto zilizoshuhudiwa kwenye mtandao wetu wa ugawaji kutoka nusu ya pili ya mwaka wa 2014 hadi robo ya tatu ya mwaka wa 2015. Tangu wakati huo tumeimarisha kundi letu la maajenti wa uuzaji wa Bima ya Maisha kupitia kwa shughuli kadhaa za uandikishaji. Kadhalika tumeweka mfumo wa mishahara bora yenye ushindani kuhakikisha tunadumisha kundi letu la ugawaji kwa viwango vya juu. Biashara ya Bima ya Jumla tuliyonunua wakati wa kipindi cha mwaka pia haikutenda kazi kulingana na matarajio yetu. Hii ilisababishwa kwa kiasi fulani na tashwishi iliyotokana na ununuzi huo, pamoja na ongezeko la kiwango kikubwa la kutengea malipo madai yaliyokuwepo baada ya kukubali utaratibu wa kuhifadhi zaidi madai. Hii inaweka msingi thabiti kwa utendaji bora siku zijazo. Tuna furaha kuripoti kwamba biashara ya Usimamizi wa Rasilimali iliafikia utendaji bora na kukuza rasilimali zilizo chini ya usimamizi wake kwa asilimia 16 licha ya kupungua kwa biashara katika soko la hisa. Mgao wa Faida Halmashauri ya Wakurugenzi haijapendekeza mgao wa faida kuhusiana na matokeo ya 2015. Hatua hii imesababishwa na kupungua kwa faida kutokana na utendaji duni katika soko la uwekezaji ambapo vitengo vya biashara vinahusishwa. Tunajitahidi kila mara kusawazisha malipo ya mgao wa fedha na haja ya kuhifadhi mtaji kufadhili ukuaji na miradi ya maendeleo inayoendelea. Tuzo na Utambuzi 2015 Ulimwengu wa biashara kwa mara nyingine umetambua nyanja ambapo Pan Africa imefanya vizuri zaidi. Mnamo mwaka wa 2016, tulikuwa washindi katika tuzo za FiRe (sekta ya bima). Kadhalika tulishinda tuzo zifuatazo za Think Business : Tuzo la Habari, Mawasiliano na Tekinolojia (ICT), Nafasi ya pili Tuzo la Usimamizi wa Mashaka, Nafasi ya pili Kuridhisha Wateja, Nafasi ya tatu Taarifa ya Usimamizi wa Kampuni Usimamizi bora ni nguzo muhimu ya biashara yetu na ni muhimu kwa ufanisi wa muda mrefu wa Kundi. Kama kampuni ya umma iliyoorodheshwa katika soko la hisa, Pan Africa inazingatia mwongozo na kanuni zilizotolewa na Halmashauri ya Masoko ya Hisa na pia inaendesha shughuli zake kuambatana na viwango vya kimataifa vilivyokubalika vya usimamizi bora. Kundi pia linajifahamisha na mabadiliko mapya katika kanuni. Kuhusiana na haya, Pan Africa inatilia makini utekelezaji wa Sheria za Usimamizi wa Mashirika kwa Watoaji Dhamana kwa Umma iliyotolewa mwaka wa 2015. Mtazamo wa mwaka wa 2016 Ukuaji duniani kwa mwaka wa 2016 unakisiwa kuwa asilimia 3.4, ongezeko kutoka asilimia 3.1 mnamo mwaka wa 2015. Ukuaji wa kiuchumi, haswa katika makoso yanayoibuka na chumi zinazoendelea unatarajiwa kupungua. Hii itaathiri pakubwa uchumi wa dunia, ikitiliwa maanani kwamba, kwa pamoja masoko yanayoibuka na chumi zinazoendelea zinajumuisha zaidi ya asilimia 70 ya ukuaji. Hata hivyo, ukuaji katika masoko yanayoibuka na chumi zinazoendelea unatarajiwa kuongezeka kutoka asilimia 4 mwaka wa 2015 hadi asilimia 4.3 mnamo mwaka wa 2016. Nchini Kenya ukuaji wa kuichumi unatarajiwa kupata kiwango cha wastani cha zaidi ya asilimia 6. Matarajio ya biashara ya hisa Endless Possibilities Pan Africa Insurance Holdings Limited Annual Report & Financial Statements 2015

Taarifa ya Mwenyekiti 19 wakati wa kipindi cha mwaka ni mchanganyiko kutokana na athari za misukumo ya nje ya chumi kuu. Hata hivyo matumaini bora ya jumla ya kiuchumi mnamo mwaka wa 2016 huenda yakachochea utendaji bora kwenye soko. Licha ya matokeo duni katika mwaka uliopita, kunao matumaini ya jumla kwamba hali ya uchumi itakuwa bora mwaka wa 2016. Kuna matumaini kuwa hii itachochea ukuaji katika sekta ya huduma za kifedha na kuondolea mbali athari mbaya kwenye upatikanaji wa faida. Hata hivyo hii itawezekana tu iwapo kampuni zitafikiria mwelekeo tofauti wa ukuaji, kuwekeza katika uendeshaji bora wa shughuli na kuthibiti mizania zao ili kuimarisha ukuaji na kujiandaa kwa kanuni bora za mtaji zinazohitajika. Mnamo mwezi Machi 2016, Halmashauri ya Usimamizi wa Bima ilitoa kifaa cha kujitathmini kuhusu kuwatendea haki wateja,ambacho kitakuwa msingi wa biashara yote ya bima kuanzia tarehe 1 Januari 2017. Tunaukaribisha mfumo huu kwani unaambatana na maadili yetu muhimu ya kuzingatia maslahi ya wateja. Kampuni yetu itatekeleza mabadiliko yanayohitajika kukabiliana na changamoto hii na kutii mahitaji hayo mapya. Kama kampuni tunasalia kuwa na matumaini mema kuhusu matarajio yetu. Tumeingia tena kwenye soko la bima ya jumla na tunajivunia nafasi yetu kama kampuni ya huduma mbalimbali za kifedha. Hii inatuweka katika nafasi nzuri ya kukabiliana na misukosuko yoyote na kuafikia matokeo bora. Hitimisho Nachukua nafasi hii kutoa shukurani kwa Halmashauri, Wasimamizi na Wafanyakazi kwa juhudi zao licha ya kukabiliwa na changamoto za hali ya kiuchumi. Nawashukuru kwa dhati na kuwatakia kila la kheri wanapoendelea kutoa huduma bora kwa wateja na wenyehisa. Ningependa pia kuwashukuru wenyehisa kwa kuendelea kutuunga mkono na kwa imani yao kwetu. Halmashauri ikizingatia mikakati ya maendeleo ya Pan Africa ina imani kwamba Kundi la Pan Africa Insurance Holdings litakua kwa kiwango kikubwa katika kipindi kijacho. Dkt. John P N Simba, MBS OGW Mwenyekiti 17 Machi 2016 Pan Africa Insurance Holdings Limited Annual Report & Financial Statements 2015 Endless Possibilities

20 Statement of the Group CEO Financial Performance It is my pleasure to present to you a review of the Pan Africa Insurance Holdings performance and operations for the year ended 31 December 2015. The year was marked by growth in our Asset Management and Property businesses, exceeding the 2014 operating profit levels. The performance of Life Insurance and Loans businesses however declined. The newly acquired General Insurance business also underperformed. This translated into a 95% decline in profit before tax for the group. Profit before tax of KShs. 54 million, down from KShs. 1.15 billion in 2014; a 95% decline Shareholders funds up by 1% to KShs.3.8 billion Total assets up by 10% to KShs. 27 billion Pan Africa Life Embedded Value (EV) increased by 4% to KShs. 3.73 billion while Group EV decreased by 19% to KShs. 5.22 billion Group Capital Adequacy Requirement (Solvency) covered 3.55 times The Group results are analysed as follows; 2015 2014 KShs M KShs M Operating surplus 512 688 Investment income on shareholders assets 106 464 Goodwill impairment (564) - Profit before tax 54 1,152 Tax (27) (281) Net surplus for the period 27 871 (Loss)/ Profit attributable to: Owners of the parent (62) 871 Non-controlling interests 89 - Endless Possibilities Pan Africa Insurance Holdings Limited Annual Report & Financial Statements 2015

Statement of the Group CEO (continued) 21 Following is a brief overview of our different business lines. Life Business The Life Insurance business performance was negatively impacted by challenges in our distribution network from the third quarter of 2014 through to the third quarter of 2015. This was coupled with adverse investment and market conditions. Gross written premiums declined by 12% to KShs. 4.6 billion from KShs. 5.3 billion in 2014. Investment returns earned on the capital portfolio also declined by 34% from KShs.1.75 billion in 2014 to KShs. 2.64 billion in 2015, primarily due to the significant decline in the equities market during the year. Profit before tax declined by 39% to KShs. 337 million from KShs. 550 million in 2014. In 2015, we bolstered our agency force through a series of recruitment drives and have also put in place competitive remuneration to ensure that we retain our distribution force at optimal levels. General Business The General Insurance business, which was brought onboard with the acquisition of Gateway Insurance Company Limited in February 2015, performed below expectation, leading to a loss before tax of KShs. 302 million. The poor performance was partly due to uncertainty created by the acquisition; as well as a significant increase in provisioning for outstanding claims upon adoption of a more conservative claims reserving methodology in line with regulatory requirements. The change in the reserving policy was part of a business re-organisation exercise carried out by the Group after the acquisition and was aimed at laying a strong foundation for optimal performance in the future. Apart from the factors above, performance was also adversely impacted by a goodwill impairment of KShs. 564 million recorded in the year. This relates to goodwill recognised in respect of the acquisition of Gateway Insurance Company Limited. The impairment loss was mainly driven by the increase in claims provisioning that reduced the company s net asset value, combined with use of a more conservative internal discount rate to value the business for impairment testing purposes. The impairment is therefore not a reflection of management s view of the future potential of the acquired entity. Asset Management Business The Asset Management business delivered strong performance, growing its assets under management by 16% despite the sharp decline in the equities market. This supported higher fee income and a 65% increase in profit before tax to KShs. 28.5 million. Other Income Sales from our property portfolio more than doubled to KShs. 518 million from KShs. 190 million the previous year, also positively impacting the 2015 profit before tax. The Assets Under Management at the end of fourth quarter were KShs. 13.9 billion of which 23.8% was from third parties. The Assets Under Management for the year were 14.8% higher than the value of assets at the end of 2014 despite the impairment of the equity and fixed income assets in the portfolio. The Asset Management Business returned positive performance for all portfolios. Consequently, our decision to hold a higher allocation on money market assets and a neutral allocation offshore was richly rewarded. The business remained ahead of budget on revenue, profitability and asset inflows but suffered from the impairment of equity and fixed income holdings. We continue to engage productively with scheme trustees, administrators, brokers and independent financial advisors. We expect the outcomes of these engagements to be by way of higher and consistent inflows. Our Unit Trust product recovered spectacularly to close at 98% of the budgeted inflows (KShs. 584 million against KShs. 595 million). Our expansion of the distribution to include independent financial advisors continues to bear fruit even as sales by the Life agency force gains traction. Pan Africa Insurance Holdings Limited Annual Report & Financial Statements 2015 Endless Possibilities

22 Statement of the Group CEO (continued) Group Strategy Pan Africa Insurance Holdings has embarked on implementing an ambitious 5 year strategic plan that is aimed at positioning it as a leading comprehensive financial services company in Kenya by the year 2020. This will be achieved by aligning our growth to the most promising segments in the economy, and diversifying our offering to wider customer solutions that will be delivered to them in the most efficient way backed by excellent service. The group will therefore make significant investments in re-designing the organisation structure and moving towards an integrated target operating model. The main objective of the plan will be attainment of operational efficiency through integrating core support functions at the group level and disseminating associated costs and benefits in a manner that exploits the full potential of opportunities across the group, delivers seamless service, reduced costs and improved profitability. At the centre of this integration journey will be our people and distribution partners that we work closely with to attain the ambitious goals. Rebranding In line with the ongoing group strategy exercise, we plan to embark on a rebranding exercise which will see Pan Africa Insurance Holdings Limited and its subsidiaries (Pan Africa Life Assurance Limited, Pan Africa Asset Management Limited and Gateway Insurance Company Limited) fully assume the identity of the renowned Sanlam brand. The rebranding exercise is also aimed at giving the group and all the business units a single identity and renewed focus on what matters most to all stakeholders. The proposed rebranding is currently undergoing approval by our shareholders and other key stakeholders. Corporate Social Responsibility Our Corporate Social Responsibility program revolves around three main pillars: Education, Environment and Caring for the Community. Our programs are geared towards empowering communities in which we operate, in addition to being aligned with the Millennium Development Goals as well as the National Vision 2030 objectives. Some of the CSR initiatives we executed in 2015 are as detailed below: Financial support to needy students We continued to support promising but needy students around the country through their secondary education. The aim of this program is to give the beneficiaries together with their families and communities hope and opportunity for a bright future. Sponsorship requests from needy students across the country are normally vetted based on level of need, performance, gender and geographical balance. The program has now been improved to include career guiding and counseling from volunteer members of staff. In 2015, four male and two female students were enrolled in this program. One of the graduate beneficiaries, Marthar Obote, joined Maseno University in 2014 to study International Relations, Diplomacy and IT and is now in her second year of study. Youth Empowerment Vijana Tujisort na Pan Africa program - This is a financial planning program that is targeted at young people. During the year, we reached over a thousand young people from across the country. Supporting Educational contests - As a gesture to motivate youth to pursue their potential, we partnered with Nyandarua County and donated trophies that were awarded to excelling One of the Sponsored students, Anne Raayo in the company of her guardian after receiving her scholarship award letter at Pan Africa Life Offices students during their Science contest in 2015. We also gave the same sponsorship to Yatta District during their annual education day. Leap Academy Pan Africa Life s Leap Talent Academy is an initiative that demonstrates our commitment to skills and talent development within the industry and for our country at large. The initiative currently running include: Graduate Trainee program Internship program Beyond Borders experiential learning Endless Possibilities Pan Africa Insurance Holdings Limited Annual Report & Financial Statements 2015

Statement of the Group CEO (continued) 23 The main motivation of these programs is imparting the skills required to keep the insurance industry sustainable in Kenya and the region. We therefore focus on benchmarking the knowledge that these young people are exposed to with global standards. Leap Graduate Program Through this program, Pan Africa Life gives fresh graduates the opportunity to transition from class to work environment. We offer them the exposure to specific technical skills or professional experience required to effectively perform in the business environment, which has not already been acquired in school. To achieve this, we have a comprehensive two (2) years development plan in place that ensures a structured and blended learning - including on-the-job learning experience and professional certifications for example ICDL, IHRM, LOMA. Each beneficiary is assigned a mentor (member of staff) to coach and give them support along the way in form of regular feedback on performance and development. Projects and specific work assignment across Pan Africa Life s business units not only broaden their understanding of the Life Insurance industry, but also help them understand the various career opportunities within the industry. Pan Africa team at the Nyayo National Stadium during Mater Heart Run 2015. also utilized to make donations towards Nyandoche Ibere Girls Secondary School and Palmhouse Foundation. Group Chief Executive Officer 17 March 2016 In 2015 we had 20 beneficiaries of the Graduate Trainee and Internship program. Caring for our Community We engaged in various initiatives that are geared towards improving the standards of living in the communities we operate in: Running for a good cause - The Mater Heart Run and SCB Nairobi Marathon As it has been our practice, we participated in this year s Mater Hospital Heart Run, an annual family marathon event that raises funds to finance heart transplants for needy children all over the country. We also partnered with the Standard Chartered Nairobi marathon whose proceeds go towards giving needy children a chance to sight treatment, by donating a cheque of KShs. 250,000. Chairman s Fund Apart from our Corporate Social Responsibility fund, we have established the Chairman s fund whose objective is to support corporate citizenship endeavors that the Chairman may deem worthwhile. This year, the fund sponsored the National Prayer Breakfast through a donation of KShs.100,000. The Kitty was Pan Africa Insurance Holdings Limited Annual Report & Financial Statements 2015 Endless Possibilities

24 Notice of the Annual General Meeting NOTICE IS HEREBY GIVEN that the 70th Annual General Meeting of the Company will be held at the Ballroom, Stanley, Kenyatta Avenue, Nairobi on Friday, 20th May 2016 at 10.00 am to conduct the following business: 1. To table the proxies and note the presence of a quorum. 2. To read the Notice convening the meeting. 3. To confirm the minutes of the previous Annual General Meeting held on 13th May 2015. 4. To consider, and if approved, adopt the Balance Sheet and Accounts for the year ended 31 December 2015 together with the reports of the Chairman, the Group Chief Executive, the Directors, the Auditor and the Statutory Actuary. 5. To note that the Directors do not recommend the payment of Dividend for the financial year ended 31 December 2015. 6. To elect Directors: 6.1 Dr John Simba retires by rotation in accordance with the Company s Articles of Association and having attained the age of seventy years, retires in accordance with the Code of Corporate Governance Practices for Issuers of Securities to the Public 2015; and being eligible, offers himself for re-election. 6.2 Susan Mudhune, retires by rotation in accordance with the Company s Articles of Association and offers herself for reelection. 6.3 Jonathan Paul Wrench, retires by rotation in accordance with the Company s Articles of Association and does not offer himself for re-election. 7. To approve the Directors remuneration. 8. To note that the auditor, PricewaterhouseCoopers will continue in office in accordance with Section 721(2) of the Companies Act No. 17 of 2015 until the conclusion of the next Annual General Meeting and to authorise the Directors to fix their remuneration. 9. To transact any other business with the permission of the Chair for which 48 hours notice had been given to the Company Secretary at the registered office of the Company. Special Resolutions 10. Change of Name To consider and if found fit, to pass the following resolution as a special resolution: That the name of the Company be and is hereby changed from Pan Africa Insurance Holdings Limited to Sanlam Kenya Plc ; with effect from the date set out in the Certificate of Change of Name issued by the Registrar of Companies. Endless Possibilities Pan Africa Insurance Holdings Limited Annual Report & Financial Statements 2015

Notice of the Annual General Meeting (Continued) 25 By Order of the Board Group Company Secretary 25 April 2016 Note: 1. A member entitled to attend and vote at the meeting and who is unable to attend is entitled to appoint a proxy to attend and vote on his behalf. A proxy need not be a member of the Company. To be valid, a proxy form, which is attached to the end of this report, must be completed and signed by the member and must be lodged at the offices of the Company s Share Registrar s Image Registrars, 5th Floor, Barclays Plaza, Loita Street, Kenya so at to arrive not later than 10.00 a.m. on Wednesday 18th May 2016. 2. In accordance with the Company s Articles of Association, a copy of the entire Annual Report and Accounts will be available for viewing or from the Company s website www.pan-africa.com or from the registered office of the Company, Pan Africa House, Kenyatta Avenue, Nairobi. An abridged set of the Balance Sheet, Income Statement, Statement of Changes in Equity and Cashflow Statement for the year ended 31 December 2015 have been published in two daily newspapers with nationwide circulation. Pan Africa Insurance Holdings Limited Annual Report & Financial Statements 2015 Endless Possibilities